Smartphone maker Xiaomi was supposed to be the poster child for China’s recent move to allow companies to issue depositary receipts on mainland bourses, akin to ADRs that are traded in the U.S. That way, the theory ran, Chinese investors would be able to get a piece of some of the country’s most successful companies, like Alibaba and Tencent, which have previously listed in Hong Kong or New York.

That is a big embarrassment for the Chinese authorities. Xiaomi’s IPO is a big deal—it’s aiming to raise at least $10 billion. Having about half of the IPO in mainland China—as was initially hoped—would have been a big fillip for the new CDRs. The process for introducing them has been a rush, though. It’s less than three months since the government first unveiled the plan. Regulators appear not to have thought through the impact on the market and extra burden of paperwork the new instruments will create for companies.

It’s also a blow for Xiaomi’s hopes of a blowout valuation for its IPO. Earlier this year the company’s backers had been touting a figure of $100 billion for Xiaomi’s worth. Doubts about the company’s model—selling internet services through low-margin handsets—have pulled that back now to the $60 billion range.

Having a critical mass of tech-hungry Chinese retail investors would surely have helped Xiaomi in its quest: Recent listings in China, such as those for Foxconn Industrial and battery-maker
Contemporary Amperex Technology,
have proven highly popular. At $60 billion, Xiaomi would be valued about 85 times trailing earnings, excluding one-offs—still an eye-watering level. Without support from mainland Chinese investors, Xiaomi may have to recalibrate its expectations.